Quantitative Macroeconomies with Heterogeneous Households

Federal Reserve Bank of Minneapolis Staff Report No. 420

Posted: 24 Jun 2009

See all articles by Jonathan Heathcote

Jonathan Heathcote

Minneapolis Fed

Kjetil Storesletten

University of Oslo - Department of Economics; Centre for Economic Policy Research (CEPR)

Giovanni L. Violante

New York University, Department of Economics; Centre for Economic Policy Research (CEPR)

Date Written: January 1, 2009

Abstract

Macroeconomics is evolving from the study of aggregate dynamics to the study of the dynamics of the entire equilibrium distribution of allocations across individual economic actors. This article reviews the quantitative macroeconomic literature that focuses on household heterogeneity, with a special emphasis on the "standard" incomplete markets model. We organize the vast literature according to three themes that are central to understanding how inequality matters for macroeconomics. First, what are the most important sources of individual risk and cross-sectional heterogeneity? Second, what are individuals' key channels of insurance? Third, how does idiosyncratic risk interact with aggregate risk?

Keywords: Incomplete Markets, Inequality, Insurance, Idiosyncratic Risk, Redistribution

JEL Classification: E21, E24, E32

Suggested Citation

Heathcote, Jonathan and Storesletten, Kjetil and Violante, Giovanni L., Quantitative Macroeconomies with Heterogeneous Households (January 1, 2009). Federal Reserve Bank of Minneapolis Staff Report No. 420 . Available at SSRN: https://ssrn.com/abstract=1424131

Jonathan Heathcote (Contact Author)

Minneapolis Fed ( email )

90 Hennepin Avenue
Minneapolis, MN 55480
United States

HOME PAGE: http://www.jonathanheathcote.com

Kjetil Storesletten

University of Oslo - Department of Economics ( email )

P.O. Box 1095 Blindern
N-0317 Oslo
Norway
+47 2284 4009 (Phone)
+47 2285 5035 (Fax)

HOME PAGE: http://folk.uio.no/kjstore/

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Giovanni L. Violante

New York University, Department of Economics ( email )

269 Mercer Street
New York, NY 10003
United States
212-992-9771 (Phone)
212-995-4186 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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